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If you don’t already have a credit score, you are not alone. It is estimated that one in ten adults eligible for a credit score does not yet have one, according to research by FICO, which develops the credit score that the vast majority of lenders actually use.
Fortunately, consumers have many options to start their credit building journey.
Do I have a credit score?
Not everyone has a credit history. For example, children do not have a credit score until they start taking credit as teenagers. To find out if you have a credit score, it’s helpful to know how it’s created and where to find it.
Where does a credit score come from?
Credit scores don’t appear out of thin air. When you open a credit account, your lender will often share this information with one or more of three credit bureaus: Equifax, Experian or TransUnion.
“After you have at least six months of credit history, you can get your first credit score,” says Joanne Gaskin, vice president of scores and analytics at FICO.
“For example, if someone opened a Target card seven months ago, they now have a FICO® Score,” says Gaskin.
A FICO® score is created using your credit report information, and billing information is not all that is included. Here’s the exact breakdown, and how each credit factor contributes to creating a unique FICO® score just for you:
- Payment history: 35%
- Amounts owed: 30%
- Length of credit history: 15%
- New credit: 10%
- Credit mix: 10%
How can I get my credit score?
There are many ways to find out your credit score, and some are easier than others.
The easiest way to find out your FICO® Score is to find out if your bank or credit union participates in the FICO® Score open access program.
“Here, lenders are already using FICO® Scores for account management purposes,” says Gaskin. “[They] They can then turn around and share those results with their customers for free.”
Another option is to create an account with myFICO or attend one of the FICO Score A Better Future events where their non-profit loan counselors can get your FICO® Score for free.
Also note that in accordance with the Fair Credit Reporting Act (FCRA), you can request a free copy of your credit report from each of the three major credit bureaus once a year through AnnualCreditReport.com. It is important to check the information on your credit report to make sure there are no inaccuracies.
How to build a credit score without a credit history?
“The most important thing to know is that you can get a loan pretty quickly,” says Jerry Detweiler, director of education for Nav, a business lending website. “I have seen consumers make significant progress in building credit from scratch in just 6 to 12 months.”
The catch 22 of needing credit to get credit may still exist, but there are many ways to start building credit these days.
Add Alternate Details to Your Credit File
Even if you don’t have credit per se, you’re probably already paying bills like rent, cell phone data plan, Netflix, and others regularly. As a rule, these companies do not reward you by reporting timely payments to the credit bureaus, even though it may actually help you.
Although recently the situation has changed. FICO has the FICO® Score XD (developed in partnership with LexisNexis® Risk Solutions and Equifax®) and the UltraFICO™ Score, which uses non-traditional credit data to help you increase your credit.
Other companies are also working on similar projects such as Experian Go™, which allows people to run their own credit files and add more alternative data to them using Experian Boost™.
“We learned that when consumers use Experian Go™ in combination with Experian Boost™, the average consumer achieves a credit score of 665, which is near the best FICO® score,” says Will Lewis, Experian’s Global Head of Diversity, Equity and Inclusion Officer .
Become an authorized user
The quickest way to start earning credit is to find a friend or family member who is in charge of the money and ask them if they would consider adding you to their credit card account as an authorized user.
This can add all of their credit history with that account directly to your file, and it will be treated exactly the same when creating your score, as if you were the person managing the account all along. This is not an approach that is available to everyone, but if it suits you, it is worth considering.
Detweiler has good advice on how to have those conversations with the loved ones in your life.
“You can always approach it like this: ‘Hey, don’t feel bad about giving it up. I researched this opportunity to build my credit. But if you don’t like it, don’t worry about it. I never have to touch the card, you don’t have to give it to me. Just adding me will help me increase my confidence,” says Detweiler.
Get a credit card
If you are unable to become an authorized user, you can also try opening a new credit card yourself.
“Maybe it will take a little longer. [to get a FICO® Score] because it will be a completely new account,” says Detweiler.
Most people who do not have a FICO® Score cannot immediately qualify for a regular credit card. Instead, if you don’t already have a loan, a retail store card or a secured credit card may be a good option because both tend to be easier to apply for. If you are a young person, you may also consider applying for a student credit card.
Find Loan Builder Loans
Another option is to take out a small building loan, which is available from many credit unions and local banks. They work similarly to a secured credit card, where you put money in a savings account, get a loan, and pay it back within a few months.
“It’s another way to get positive [payment] information into traditional credit bureau files,” says Gaskin.
Getting a loan when you don’t already have a loan can be difficult, but it’s worth it.
“Ninety percent of the eligible population receives a traditional FICO score,” Gaskin says, adding that FICO aims to further expand consumer access to credit.
With a little research and intention, you can build yourself a good credit score over time. — regardless of your starting situation.
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